Free Trade Essay

528 words - 3 pages

Free trade means eliminating all restrictions in trading between two countries. Some of those restrictions are tariffs or quotas.

Imagine that you have a country A and a country B who wish to trade with each other. Country A has plenty of coal and has mastered efficient ways how to produce coal thus making coal price very cheap. Country B only has little coal reserves, and it's extraction method are not as efficient as in country A. Consequently, the price of coal is lower in country A other than country B

If country A wants to export coal to country B it has to pay tariff. Tariffs are kind of a tax. Tariff is calculated on the price or amount of coal. It must be paid by either exporter from country A or importer from country B. ...view middle of the document...

They have tried to make exactly same wine, but it's quality simply couldn't match that of country B. But they also have to pay tariffs if they want to export it. At the end price of the same wine would be higher in country A than in country B because of tariffs.

Pros

The most prevalent view by all economists today on free trade is that it is a good thing for both economies, and that it should be eliminated all whatsoever. In the ideal world there should be no tariffs, quotas or any kind of trade restriction. Good should be allowed to freely flow over the border. Why? Lots of economic models have been made to analyze it, and the conclusion is that free trade is good because of comparative advantage and specialization.

Country A is better in producing goal, and country B is better in producing wine. If we reduce tariffs, country A would produce more coal and it would be cheaper for everyone. Country B will produce more wine which will be cheaper for everyone.

Companies in country A which have produced wine would stop to exist because all wine production will move to country B. But all production of coal would move to country A instead.

The final result is that everybody is a winner, both producers and consumers. Consumers get cheaper products, produces have access to bigger market and produce more thus making higher profits. Country A has a competitive advantage in producing coal, but country B has competitive advantage in producing wine.

Also, if we impose too strict trading regulations, we might have problems with illegal activities like smuggling.

The most important model of free trade is David Ricardo's model of competitive advantage.

Other assignments on Free Trade

Trade Policy Essay

1174 words - 5 pages simplifying the processes involved in the export sector and moving away from quantitative restrictions, thereby improving the competitiveness of Indian industry and g p reducing the anti-export bias. • Steps have also been taken to promote exports through g g multilateral and bilateral initiatives and giving several incentives to exports to cope with all uncertainties at the global level. Features of Trade Policy Reform in India • • • • • Free

Global Challenges In It Essay

409 words - 2 pages data-flow laws’. Keeping track of these laws and incorporating them into the procedures and computer systems of multinational and trans-national organizations can be very difficult and time consuming, requiring expert legal advice. | Trade agreements |  YES | Countries often enter into trade agreements with each other. The EU has trade agreements among its members. The North American Free Trade Agreement (NAFTA) and the Central American Free

International Management Homework

1120 words - 5 pages many people given available work opportunities; and they are poorly educated. Free trade cannot possibly be in the interests of such nations! Do you agree or disagree, discuss. 3. Read the section on “Evidence for the Link Between trade and Growth” in Chapter 5 from your text book. With the help of this information as well as other sources (internet, books, magazines) identify and explain the channels through which trade positively affects

Doing Business

990 words - 4 pages few natural resources but are rich in technological know- how. Through the process of free trade they can buy or trade their goods or money for things their countries need or want. Free trade is the movement of goods and services among nations without political or economic barriers. Countries also exchange more than goods and services, such as medical advances, space exploration and even labor. There are two theories of this exchange. The

The Influence Of Law In Business

936 words - 4 pages regulate businesses and enforce the Act, which oversees many different things- from false advertising to false claims related to where a product is made. The Act additionally allows for the Federal Trade Commission to conduct investigations and to report any such indiscretions to Congress. (www.ftc.gov). While I agree that such regulations are needed to keep an open and free marketplace, I can understand both the positive and negative aspects of such

Paper

3448 words - 14 pages in turn to lead to lower prices for distributors and consumers with the goal of increasing the level of welfare, while leading to and increase of economic productivity of the states. The trade stimulation effects intended by means of economic integration are part of the contemporary economic Theory of the Second Best: where, in theory, the best option is free trade, with free competition and no trade barriers whatsoever. Free trade is treated

Chapter 6 International Business

7113 words - 29 pages Seeks Protection THE CASE FOR GOVERNMENT INTERVENTION Political Arguments for Intervention Country Focus: Trade in Hormone-Treated Beef Economic Arguments for Intervention THE REVISED CASE FOR FREE TRADE Retaliation and Trade War Domestic Politics DEVELOPMENT OF THE WORLD TRADING SYSTEM From Smith to the Great Depression 1947-1979: GATT, Trade Liberalization, and Economic Growth

Regional Trade - South Pacific

5104 words - 21 pages e Table of Content Declaration of Originality 2 Acknowledgements 3 Introduction 4 Economic Integration: Definition 5 Background of Free Trade in the South Pacific 6 PICTA 7 PACER 7 Advantages and benefits of Economic Integration 9 Drawbacks of Regional Economic Trade 11 Resolution 15 Conclusion 17 Bibliography 18 Appendices

Agadir Agreement

3847 words - 16 pages -Mediterranean Conference in Marseilles in November 2000. In the course of this meeting the four countries expressed their desire to create a common free trade area. The initiative was warmly welcomed by their foreign minister colleagues and even found expression in the final declaration. At the so-called “Economic Summit” of the Arab League in Amman in March 2001 shortly thereafter, Arab leaders pleaded for the enhancement of economic co-operation

Alter Eco

6431 words - 26 pages Table of Contents EXECUTIVE SUMMARY 2 INTRODUCTION 3 I- MAIN RESULTS 4 A) CURRENT MARKET SIZE AND STRUCTURE OF FAIR TRADE MARKET 4 B) PAST MARKET EVOLUTION 6 II- THE COMPANY 8 A) COMPANY’S CURRENT SITUATION AND RECENT HISTORY 8 B) MAIN FEATURES OF COMPANY’S OVERALL STRATEGY 8 C) STRATEGIC PLACE OF THE QUINOA IN OVERALL ALTER ECO STRATEGY 10 III- THE COMPETITION 10 A) IDENTIFICATION OF THE MAIN COMPETITORS 10 B) MARKET POSITION OF

Information System

1763 words - 8 pages integrations does not emphasize only in the political dimension but also take place in the field of economics, security and environment. There are five stages which are necessary for any regional integration to pass through these are; Free trade areas, custom unions, Common Market , Common Currency and Political Union. The few examples of regional integration in Africa and Europe are as follows Southern Africa Development Community (SADC), Common

Similar Documents

Free Trade Essay

694 words - 3 pages Free trade and employment has a connection that has become one of the world’s most significant concerns because of how the markets interact with one another. Both are able to affect millions of lives around the world. Free trade plays a critical part to boosting the global welfare and employment sectors of the world. Some economists have finally realized that free trade leads to numerous advantages in the labor sector for everyone involved

Econ251 Essay

438 words - 2 pages the agreement. Levels of Economic Integration: NAFTA Customs Union Common Market Economic Union Political Union Type Free trade External Tariff Free factor Fiscal& monetary Free trade EFTA Area Customs union EEC57 Common market EC80 Economic union

Different Economic Integration And How Each Affect International Trade

2503 words - 11 pages intercontinental economic blocks, such as the Comprehensive Economic Partnership for East Asia and the Transatlantic Free Trade Area. As international trade and investment levels continue to rise, the level of economic integration between various groups of nations is also deepening.  The most obvious example of this is the European Union, which has evolved from a collection of autarkical nations to become a fully integrated economic unit.  Although it

Ecop1003 Essay

1297 words - 6 pages politicians and the states (Gilpin, 1987). In the years since World War II, world trade has technically become free trade (Economist, 2009). By definition, free trade is a term that is used to describe “the ability of people to undertake economic transactions with people in other countries free from any restraints imposed by governments or other regulators” (Economist 2009: 1). As a result of free trade, “the volume of world merchandise trade at the start